FTLife price tag shows Hong Kong’s attraction

The acquisition of Hong Kong life insurer FTLife late last year raised some eyebrows as the HK$21.5 billion (US$2.75 billion) price tag was almost double what JD Group, the seller, had paid in 2015.

Hong Kong conglomerate NWS Holdings is paying around 21 times 2017 earnings in an all-cash deal conducted through a wholly owned subsidiary, less than four years after the Chinese private equity firm bought it from Brussels-headquartered Ageas for US$1.4 billion.

FTLife’s operating profits climbed to HK$1.039 billion (US$132.5 million) in 2017 up 59% over the previous year. The company attributed the profit increase to “higher interest income from fixed income securities and higher dividend income on listed equities holdings”. Total assets climbed to HK$52.4 billion.

NWS Holdings is banking on a combination of the integration of the Greater Bay area, a continued appetite for Chinese to buy insurance in the city and Hong Kong’s robust economic growth. In addition, Hong Kong is set to keep its place as a leading international financial centre, attracting well-paid overseas professionals.

The acquisition will also help diversify the group’s sprawling ventures in infrastructure and services. NWS has said it wants to harmonise opportunities between its healthcare and wellness services while also cross-selling to other wealthy customers. FT Life also has its own new tower, FTLife Tower, which opened in Kowloon Bay last October.

There is also potential for the Hong Kong-headquartered insurer to tap a touted Insurance Connect scheme between Hong Kong, Macau, Shenzhen and Guangdong, which could one day allow Hong Kong’s insurers to sell in all three markets, although regulatory alignment and much work would need to be done. If achieved this would include service centres around the region for customers to buy policies and service claims.

Hong Kong provides a strong, steady base of customers for insurers, and Richard Li’s Pacific Century Group has used it as a hub from which to build fast growing pan-Asian insurer FWD. Pacific Century used to own FTLife, before selling it to Fortis, now known as Ageas, in 2007.

Hong Kong has relatively low unemployment, low inflation, reliable growth and large GDP per capita, while the Hong Kong government has deep reserves.

The Special Administration Region’s population that has the highest life expectancy in the world, while a steady stream of one-way permit holders – 150 are permitted a day – from China have been helping keep the population on the rise.

NWS Holding’s acquisition of FTLife is still in the approval stages by the Hong Kong Insurance Authority, a process that can take up to 18 months to complete.

At the time of the announcement of the transaction FTLife’s chairman Fang Lin commented: “The development strategy of [New World Development] and NWS Holdings ‘deep roots in Hong Kong and focus on the Greater Bay Area’, highly synchronises with FT Life’s long-term vision of ‘deep roots in Hong Kong, integration with Mainland China and expansion throughout Asia’ and strategic focus on the Greater Bay Area.”